TEMPO.CO, Jakarta - Bank Indonesia (BI) expects Indonesia`s economic growth in the third quarter to improve from the previous quarter. The overall economic growth for this year is estimated to be higher than the initial projection of 5.0 to 5.4 percent and will increase to 5.1 to 5.5 percent by 2018.

Bank Indonesia's head of economic and monetary policy Dody Budi Waluyo said the economic recovery outlook is supported by fiscal expansion and monetary easing.

"Consumption in the third quarter is expected to grow, supported by the distribution of the 13th salary of civil servants as well as the distribution of social assistance, and the high amount of government spending on goods," Dody said in Jakarta, Thursday, October 19.

The central bank also expects investment improvements to continue, with support from investment growth and improved non-construction investment. This is reflected by the increased sales of heavy equipment in the mining and plantation sectors.

In line with the global economic recovery, Dody said, exports are expected to improve—especially in mining and plantation products. The rapid economic growth is mainly supported by trade, hotels and restaurants, and the processing industries.

Nevertheless, there are a number of global risks to watch for including the Federal Reserve's interest rate (FFR) hike in December. The Fed Rate hike is an impact of normalization of the US central bank's balance sheet that will begin at the end of October, as well as the leadership transition in the Fed's body.

Additionally, Indonesia must keep an eye on geopolitical risks stemming from Spain and the leadership transition process in several European countries.

"In Asia, there is a geopolitical risk stemming from the Korean peninsula," he said.

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